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Business

Terry Gou: Mercurial warlord of business

TAIPEI -- Foxconn Technology Group has been chasing Sharp, the embattled Japanese electronics conglomerate, since 2011, and the hunt reveals much about the strengths and weaknesses of Terry Gou, the 65-year-old Taiwanese founder of the world's largest contract electronics manufacturer.

     Gou's tenacity has brought opportunities and high growth to his company, which is called officially Hon Hai Precision Industry, and to its shareholders. Yet his domineering, sometimes willful approach can alienate those he might need as allies.

     Foxconn wants Sharp, a hemorrhaging household name around the world, for its advanced display technology. The Taiwanese company is prepared to pay 700 billion yen compared to the 300 billion yen that has been offered by the state-backed Innovation Network Corporation of Japan (INCJ). Foxconn has sweetened its offer by promising not to fire Sharp's management or demand that existing lenders waive debts -- as the rival Japanese bidder has been proposing.

     Gou even went so far as to suppress his normally imperious manner to make a gentle appeal: "We don't want to destroy this company," Gou said. "We want it to continue for another hundred years -- working with us is the right decision."

     The seductive approach seemed to be working. Kozo Takahashi, Sharp's president, revealed in early February that his company is devoting more attention to Foxconn's bid than to INCJ's, and plans to make a decision within the month.

     Yet Gou's cocky nature is never far beneath the surface, and may have undone his soft tack. On Feb. 5, he marched into Sharp's offices to press his offer.

     "I am hoping to nail the deal this afternoon," Gou told reporters outside Sharp's headquarters in Osaka, western Japan. But the hours of negotiation that followed were inconclusive. Gou told the press that Sharp has given Foxconn first refusal rights, but Sharp refuted this.

     The parties are clearly not finding agreement easy, and Gou's swashbuckling style may have done little to reassure the beleaguered Sharp management. It has never been an easy relationship. When Gou first negotiated with Sharp for a minority stake in 2012, he reportedly put backs up by saying he could buy the whole business if he chose. Subsequently, he agreed to take 9.9% of the company for 550 yen per share, but retracted the offer as the stock price plummeted. The incident left a bad taste in Osaka.

Hands-on workaholic

Gou is often compared to a military strongman. Aides say he frequently overrules his senior executives and advisers on key decisions -- but more often than not he is vindicated.

     Terry Cheng worked under Gou at Foxconn from 2007 to 2012 and had served as his longtime counselor before that. When Gou wanted to establish Innolux in 2003 to develop liquid crystal display (LCD) technology, Cheng recalls that there was little support for the idea among Gou's external advisers. Taiwan already had plenty of suppliers. Gou prevailed, however, and has established Innolux as the world's third largest LCD maker after Samsung Electronics and LG Display in South Korea.

     "At Foxconn, no one works longer and harder than Chairman Gou -- he works 15 hours a day, seven days a week," Cheng said, echoing a senior aide to Gou.

     "Terry is not a genius," said the aide. "He got to where he is today by hard work and assiduousness. He knows Foxconn's technology better than anyone else, and that is why he has better judgment than his senior executives."

     While Gou is an inspiration to many who work for him, often around the clock, he courts controversy and is viewed in Taiwan as something of a loose cannon. There was open public dismay there when he said in 2014 that democracy could not boost the national economy. His intimate ties to the outgoing, China-friendly Nationalist, or Kuomintang, party, which was trounced in presidential and parliamentary elections in January, has not improved his popularity. It has also not gone unnoticed that Foxconn, a key contract assembler for Apple Inc., employs some 1 million workers in China but only 10,000 in Taiwan.

     Gou's devout worship of Guan Yu is considered eccentric. The legendary Chinese general served under warlord Liu Bei in the Three Kingdoms period in the third century, and is revered as Lord Guan. Gou wore a bright yellow scarf that had been blessed at a Lord Guan shrine in Shanxi, his father's home province in China, when he arrived for his talk with Sharp last Friday.

Rags to riches

Whatever his foibles, Gou has excelled as an emperor among businessmen, and has over a million worker-soldiers at his command. Foxconn's global manufacturing empire extends to Brazil, China, the Czech Republic, India, Mexico, the US, and Vietnam from its headquarters in Tucheng, a gritty Taipei suburb. In 2015, revenue hit a record New Taiwan $4.48 trillion, about half of which came from Apple contracts.

     Gou's origins are modest. His father came to Taiwan from China and became a policeman. Equipped with an undistinguished degree from a local maritime college, and some experience in a shipping company, Gou started up in 1974 with NT$100,000 from his mother in a business making plastic components. He soon began to focus on producing molds, which to this day remains one of Foxconn's core competencies.

     A breakthrough came in 1980 when Gou won an order from Atari, the U.S. game maker where the late Steve Jobs gained some early experience, supplying connectors for joysticks on game consoles. In 1988, Foxconn revenue exceeded NT$1 billion and the company started building plants in China.

     By the mid-1990s, Foxconn had lifted itself up as an Apple supplier making frames for Macintosh computers. In 1996, Gou boosted the company's manufacturing credentials with a large component order from Compaq while he was still building new facilities in Shenzhen. He outsourced production to other factories until he could get the Shenzhen plant operating.

     Gou feels that particular decision was key to the rapid growth that followed. He always reminds his lieutenants of how he slept in a shipping container on the construction site in Shenzhen for months in order to fulfill the order.

Conflicting sides

One of the toughest challenges for Gou came in 2010 when a string of suicide attempts resulted in at least ten confirmed deaths that year alone at the Shenzhen factories. The tragedies shocked the world. Still relatively unknown, the company was thrust into the public gaze. Its brutal military-style management with long working hours were heavily criticized in the international press and by labor groups.

     "I am deeply saddened, and I have not been able to sleep well for a month," he said in May 2010 after another attempt came to light. Foxconn has since raised its minimum wage, set up counseling hotlines and capped overtime.

     The Shenzhen problems followed the death of Serena Lin, his first wife, from cancer in 2005 and his brother, Tony, from leukemia in 2007. Gou then became interested in charities, and has sponsored cancer research. He has also donated elsewhere, including most recently NT$200 million for victims of the massive earthquake on Saturday in Tainan, a city in southern Taiwan.

     Foxconn has a brewing succession crisis with no heir apparent designated for after Gou's departure. There is speculation that the manufacturing colossus will be carved up in the post-Gou era, but the man himself has no immediate plan for going anywhere.

     "I still have my family to support," he said in 2014, "so I cannot retire too soon."

     Gou now has another compelling reason to remain in the driver's seat. Should it transpire, the Sharp acquisition would be Foxconn's biggest corporate buyout and the group's first merger with a major non-Taiwanese company. Even without the delicate relationship that already exists between the two, turning around the ailing but proud Japanese electronics giant would be one of Gou's toughest-ever challenges.

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